It's not the technology stupid!: Romantic & pragmatic thoughts on what consumers want from recorded music
It doesn't take particular genius to state that the market for recorded music is in the midst of some bizarro transitions right now. We all know the way things are trending -- CD sales are down! The major record labels don't know how to deal with it! The concert & festival business is getting stronger! Indie record labels seem to be doing alright!
Please note that none of these trends, in isolation, help us figure out what the music industry should be doing to fix itself. Most music businesspeople are too busy counting their money to see beyond the next record release and tour cycle. Journalists should be better at telling us what these trends mean for the future -- but that'd require more insight than most journalists can summon. Reporters are alright with factual things, but tend to suck when it comes to having prescient opinions. To make another simile between campaign reporting and music business reporting, neither Obama nor McCain were the media's consensus favorites to become presidential nominees.
Yes, reporters are just that bad at reading the zeitgeist.
That said, I've run across two BLOG entries of late which quickly and incisively explain the changes in the United States' recorded music market. Note that neither BLOG involves hyperventilating commentary on the implosion of the biz. They merely recite FACTS -- something that reporters are undeniably good at uncovering. (Certainly better than me.)
After I've laid out these FACTS, I'll provide some of my own pragmatic & romantic analysis. I'd like to think I'm on to something.
Facts & statistics drawn from "How Apple Is Preparing for an iPod Slump" in the New York Times Bits blog:
iPod sales volume is static...but revenues are up.
- The number of iPods sold in the quarter grew only 1 percent from the same quarter a year ago.
- Sales of the higher priced Touch model helped Apple increase its revenue from iPods by 8 percent to $1.8 billion in the quarter, even though volume was only up 1 percent.
Apple is dominating the music field...because music is *still* a killer app:
- It sold $881 million worth of music and accessories in the last quarter, a 35 percent increase from a year ago. This makes it the largest music retailer in the country, and puts it on track to outpace the entire revenue estimated for the Warner Music Group.
- Success with the iPod seems to be helping Apple sell computers. They sold 2.3 million Macs in the quarter for $3.5 billion, an increase of 51 percent by units and 54 percent by dollars.
The New York Times conclusion: "Apple’s computer sales have been growing 2 to 3 times as fast as the overall market. But this quarter the company says it grew 3.5 times faster than the PC market overall."
Now for some facts & statistics drawn from "RIAA Releases 2007 Year-End Shipment Statistics" in Coolfer.
CDs are dying...but vinyl is showing notable strength
- CD shipments (net) dropped 17.5% while the dollar value of those shipments dropped 20.5%.
- The LP/EP category (vinyl records) saw shipments increase 36.6% with a 46.2% increase in dollar value. (Note the absolute insanity of this statistic. We'll hear more about this in my commentary.)
Subscriptions are static and mobile is not the holy grail.
- Subscriptions to music services (using a weighted annual average) increased a mere 0.7% while their dollar value dropped 2.6%.
- Mobile increased only 14.6% by units and by 13.6% by dollar value. Mobile includes master ringtones, ringbacks, music videos, full track downloads and "other mobile."
I have two reads on this data, one that is cut & dried and pragmatic, a second that is more romantic and has to do with what it all means, man.
First the pragmatism: CDs are kind of fucked, but so are radical new models of music consumption. These new business models -- mobile, subscriptions -- continue to be non-starters. Apparently few people want to get music delivered to their cell phone or have the entire cosmic jukebox available a mouse click away via a subscription (Rhapsody, et. al) -- especially if everything's going to disappear after they stop paying up. I remain somewhat optimistic that Apple might be able to sell people on subscriptions -- and there is increasing buzz that that their iTunes movie rental service was a tester for doing the same in music-- but short of that, rental & subscriptions seem fairly dead in the water.
Meanwhile, vinyl is seeing far larger percentage increases in sales than mobile and subscription services. To understand the enormity of this, realize the difference in the constituency supporting vinyl vs. the constituency supporting mobile & subscriptions. Vinyl is a format with near zero visibility, a format which the major labels actively tried to kill, a format championed mostly by word of mouth marketing among hardcore music heads (teenagers discovering punk rock or hip-hop; indie kids addicted to Insound and mom'n'pop retail; sad old single guys obsessed with getting records they already own on 180 gram vinyl; DJs). Meanwhile, subscriptions are being championed by companies who are devoting millions of ad dollars and other promotional efforts to explain and sell the public on their efforts, trying to get exclusive tracks from big name mainstream artists, et. al.
Now the romantic analysis: The key to selling music is still not about convenience, price, or practicality. It is about obsession and possession and most of all object fetish. People still love music -- and not just live concerts. They like recorded music, too, and the ownership thereof. The more "special" the object the more they like it and the more their willing to pay -- doesn't matter if it's a relatively high-priced iPhone or iPod touch, or a hard to store, hard to ship, completely inconvenient but lovely to look at piece of vinyl. (If it comes with download codes to put that album on that iPod, all the better.)
Whether people can articulate it or not, the buying public continues to enjoy having the ability to hold music in their hand and know that it's not going anywhere. (And actually, as someone who manages three separate record labels, I'm constantly asking around about people's music consumption habits and most people I run into *do* articulate the fact that they like to possess music -- even if the breadth of their holdings have increased exponentially in recent years, in part, thanks to piracy and sideloading.)
Proof of people's affection for the recorded music object is all over these statistics. Look at the halo effect the incredible product design and user interface of the iPod seems to be having on other Apple products. Sure Apple's consumer friendly technology has something to do with this, but my gut is tha "look and feel" is what draws many people to first own and obsess over Apple products.)
Further, you can look at the stats on vinyl's one-third growth in sales volume compared to the almost 50% growth in dollar value. This seems to indicate people are paying *more* money per unit for higher quality vinyl or at least fancier packaging that is bringing with it higher prices. All the major consumer electronics companies trying to introduce new, higher fidelity audio formats should study this vinyl statistic carefully. Blueray, DVD audio, 5:1 surround sound gigaprojectors, super CD audio players -- oh fuck it, I lose track of all the names! To all of these consumer electronics companies, I say, "Stop worrying so much about audio quality, focus more on nice printing dumbass." People seem to be digging a generations old format that's been virtually unchanged for decades -- and it's all because it's pretty, not because it's convenient, sounds particularly pristine, or because it's new.
(In case you care, yes, these BLOGs I'm quoting from are from late April. I don't exist on BLOGtime, and the statistics in them are just as valid now as they were one month ago. We would all do well to take the long view on the music market.)
After the jump, I tell you how to keep track of future statistics & music industry moves on a daily basis.
1. Read TheDailySwarm & Coolfer.com every morning. Both are designed for insiders & written by insiders, and I swear by both -- the Swarm for a slightly more gossipy/current events version of what's happening in the music biz, and Coolfer for raw analysis. (Its creator, Glenn Peoples, was "in the trenches" as a salesperson at physical distributors for many years, and is now a freshly minted MBA. For an example of Glenn's ability to create a mean executive summery, check out Coolfer's post from yesterday boiling down a Pew study on The Internet and Consumer Choice. It explains just how people are discovering music these days.
2. If you can stomach the occasionally wise rantings of an older gentleman with surprisingly good music taste, read Bob Lefsetz, the music consultant the music industry loves to hate.